1Neither edition of the National Changeover Plan
adequately addresses the issue of the cost of a changeover to
the single currency. There is no evidence that any estimates of
cost provided by business to the Treasury are reflected in the
Plans (paragraph 13).
The first and second Outline National Changeover
Plans are aimed at exploring the practical steps that would need
to be taken were the UK to decide to join the single currency.
The Government works very closely with business on changeover
planning and takes advice on what factors would contribute to
a cost-effective changeover. Businesses and business organisations
are able to offer such advice, even though few have attempted
an overall cost estimate. So, while the Changeover Plans do not
offer any estimates of cost, the approach to changeover which
they set out reflects business views on minimising the cost of
2We recommend that decimalisation, although not
to be used as a model for a changeover to the euro, be studied
for those successes which could be adapted for a move to the single
currency (paragraph 22).
The Euro Preparations Unit (EPU) has already studied
past papers relating to decimalisation to see what parallels might
be drawn. As the Committee has noted, the circumstances of a UK
changeover would be very different.
3The Government should produce guidance on planning
and budgeting for IT projects for euro conversion at the earliest
opportunity after a decision is made. We look to the Euro Preparations
Unit to prioritise IT, in order to minimise costs (paragraph 31).
The importance of IT has been recognised in the work
of EPU, and they will consider what more might be done in this
4Public information on planning and budgeting
for IT projects for conversion to the euro should be produced
at the earliest opportunity after a decision is made. We look
to the Euro Preparations Unit to prioritise IT considerations,
in order that the costs might be minimised wherever possible (paragraph
See response to (c) above.
5We find the prospect of large costs arising from
variation in coin manufacture, and of fraud, alarming, and urge
the Government to work now with the industries most affected.
We also recommend that the Government discuss the issue with euro
area governments, in particular Germany, to discover what measures
are in force or planned to combat potential problems arising from
non conformity of coinage (paragraph 38).
The EU Mint Directors Working Group, on which the
UK is represented, is monitoring the quality and consistency of
euro coin manufacture. A common quality assurance plan has been
The vending industry was extensively consulted during
the development of the detailed specification of the coins, and
their views were taken into account as far as technically and
The UK consults its euro area partners on all euro
area issues on a regular basis at both Committee and Working Group
6Expenses generated by the transition period may
well be unavoidable; but the Government should try to limit these
EPU is working with interested parties - including
the Royal Mint, the banks, retailers, the vending industry and
consumer groups - to develop understanding of the optimal period
to allow a smooth cash changeover to be completed as cost effectively
7We recommend that the Government set E-Day in
February if and when a decision in principle to join the single
currency is made; and that there is full consultation now with
those bodies which would be most concerned with the practicalities
of the possible coinage change (paragraph 50).
The second Outline National Changeover Plan acknowledges
that, should the UK decide to join, there is a strong case for
euro cash being introduced at a time of year when cash circulation
is low and when retailers have time for staff training.
EPU will continue to work with major stakeholders
in order to develop understanding of the factors which would determine
the timing of an E-day. The names of EPU's working groups can
be found in Annex 2 of the second National Changeover Plan.
8The Euro Preparations Unit and the Information
Working Group must make communication with SMEs a high priority;
and they must be able to test the effectiveness of different means
and techniques of communication (paragraph 54).
The Information Working Group was set up in 1998
by EPU and contains organisations from a broad spectrum of the
economy (including the British Chambers of Commerce, Confederation
of British Industry, Royal National Institute for the Blind and
the Royal National Institute for Deaf People). It was established
specifically to consider the challenges for the provision of public
information which would arise from a UK changeover to the euro,
were the UK to decide to join EMU. This work has included consideration
of the need to communicate with Small and Medium Sized Enterprises
In addition, EPU is also helping SMEs in the UK to
understand and prepare for the business effects that the introduction
of the euro in the euro area may bring about.
In November 2000 EPU published its Fourth Report
on Euro Preparations. This included details of the Government's
activities to help UK SMEs deal with the introduction of the euro
in the euro area.
9We recommend that, should there be a 'yes' vote
on a single currency referendum, the Government encourage businesses
to prepare financial plans for the changeover as soon as possible.
We also urge the Euro Preparations Unit to make businesses aware
of the cost implications of a changeover to the euro when advising
them on dealing with the euro area and to publicise steps that
can sensibly be taken now to minimise expense (paragraph 55).
Ensuring that SMEs plan effectively is clearly important.
For now, the Government believes that it is more important to
focus on the factors which would improve the cost-effectiveness
of a UK changeover - for example the timing of E-day or dual display
The introduction of the euro in the euro area is
a commercial reality for UK firms with links with the euro zone
and it is essential that this reality is reflected in their business
10It would be a huge wasted opportunity should
the Government not monitor developments in the euro area extremely
closely up to and after January 2002 (paragraph 56).
The two Outline National Changeover Plans stressed
the importance of learning from the euro area. EPU collates, analyses
and disseminates information on developments in euro area participants
in the single currency. The UK is learning from the euro area
in a number of ways:
- Discussions with representatives from the public
and private sector (including finance ministries, retail banks,
business representatives, local authorities and changeover boards)
in participating member states;
- Participating in EU networks on the euro; and
- Direct contacts through working groups, embassies
Relevant information on euro preparations in the
euro area is being disseminated to regional representatives from
the public and private sector via the regional forums. This is
in addition to the regular consultation on the subject in working
The Government agrees that the cash changeover in
the euro area at the start of 2002 should be given particular
attention. EPU will be working on a specific programme to take
advantage of this unique opportunity during 2001.
(k)Fear of producing high figures cannot be a
barrier to thorough and informed consideration of the likely costs
of the changeover period (paragraph 57).
The Government does not believe that it is possible
to produce credible estimates of the cost to UK business of a
changeover to the euro, as this would depend on the approach adopted
by individual firms and sectors. Nor does it believe that such
estimates improve understanding of the factors that would be necessary
for a smooth and cost effective changeover.
(l) SMEs should be a priority in any business
information campaign, in which the Small Business Service should
be given a primary role (paragraph 60).
Providing information to SMEs is clearly a priority.
(m)We have not sought to decide whether joining
the euro would be a positive step for the UK. We have concentrated
on determining the validity of previous cost estimates and the
areas in which costs will be incurred. The potential costs to
business of joining the euro are high, to be measured in billions
not millions. There is a danger that the Government and business
are underestimating the work and expense. Over the 18 months,
developments in the euro area will provide all those concerned
with an opportunity to learn from example. The Government is unwilling
even to discuss the costs to business of UK membership of the
euro, let alone to estimate them. There may be good political
reasons for this: but we fear that this policy is deterring companies
from preparing estimates for a changeover and may eventually increase
these costs. Unless and until the Government takes steps to identify
the nature and scale of the possible costs, including in particular
the implications for IT expenditure, its awareness campaigns will
prove ineffective. Costs to business will also be affected by
the transition period and the timing of physical introduction
of the new currency. These are to be decided by Government: that
decision must be based on a proper understanding of the likely
impact of the different options. The cost burden is likely to
be particularly heavy on SMEs; information and assistance for
them must be a priority (paragraph 61).
Few individual businesses have carried out an analysis
of their own potential costs, and many are reluctant to devote
resources to such an exercise. Furthermore, different approaches
to changeover and different methods of accounting for expenditure
mean that there is no robust body of data on which to base an
estimate of any reliability. For example, many larger organisations
have been adding euro functionality to their systems as part of
routine upgrades and would not necessarily identify this element
as a separate cost.
The Government believes that it is more important
to focus on the factors which would improve the cost-effectiveness
of a UK changeover - for example, the timing of E-Day or dual
display requirements. That is why the Government's approach to
planning is to work in partnership with key organisations across
the economy (including SMEs).